A bank is considering two alternatives for handling its projected number of service calls in the next decade (you should consider this as one period). If the bank sets up its own service call center in the U. S., the fixed cost is estimated to be $3,200,000.00, and the variable cost is calculated to be 28 cents per call. If the call service is outsourced to a foreign company, the fixed cost would be $150,000.00, and the unit charge would be 48 cents per call. In the following calculations, monetary values should have 2 decimal places, and volumes of calls should be rounded up to whole numbers if necessary. (a) What is the break-even number of service calls?
(b) Draw a diagram representing the in-house and outsourcing total costs which are functions of the number of service calls. Indicate the break-even number of service calls on the diagram.
(c) If the projected volume is 12,000,000 calls, would the bank set up its own service call center or outsource service call handlings? Explain your answer with calculations.
(d) If the projected number of service calls is 18,000,000 in the next decade, would the bank change its decision in part (c)? Again, explain with calculations.